Health Plan For Poor Kids In Jeopardy / State, U.S. at odds over vaccines for uninsured

Sabin Russell, Chronicle Staff Writer

Published 4:00 am, Monday, March 9, 1998

1998-03-09 04:00:00 PDT STATE -- A bold plan to bring health insurance to more than half a million low-income California children is in jeopardy because the Clinton administration is balking at the way Governor Pete Wilson structured the state program.

The latest bureaucratic set-to between Washington and Sacramento is whether the federal government will provide free childhood vaccinations to California's program, a multimillion-dollar benefit that it has provided without question in the recent past.

The problem is that the federal vaccines are only for uninsured kids or kids on Medi-Cal, the state's health insurance program for welfare recipients. But technically, the 600,000 children added to the new program won't be on Medi-Cal, and they won't be uninsured.

"It is outrageous to us that (the federal government) would even suggest withholding vaccines for California's children," said Carla Agar, California Department of Health Services spokeswoman.

The Wilson administration's California Healthy Families program was unveiled in October, amid bipartisan fanfare, as a response to a Clinton initiative to cover uninsured children.

Hailed as the largest expansion of government-sponsored health coverage since the creation of Medicare and Medicaid in 1965, the program would pool more than $311 million in new federal funds with $168 million in state money to bring children's health insurance to families unable to afford coverage on their own but deemed too wealthy to qualify for Medi-Cal.

Doctors say that, without the free federal vaccinations, the economics of the new program collapse. The program is expected to pay doctors roughly $132 a year for each child signed up. But the cost of vaccines for a 1-year-old child is said to be at least $130 -- leaving $2 to take care of all the other medical needs of young children.

The Catch-22 arose when, under pressure from Wilson, California opted for a program that would funnel the government money to private health plans -- an alternative to covering newly eligible children by expanding Medi-Cal.

And in recent weeks, the Clinton administration has signaled that California's program won't be eligible for the free vaccines.

Although officials of the federal Health Care Financing Administration will not rule until this week, they have told Californians designing the program that they are not likely to rule for the state.

"Everyone was taken by surprise on this," said Elizabeth McNeil, director of policy for the California Medical Association. "I don't think anyone even contemplated this problem."

Ironically, children covered by Medi-Cal can get the federal vaccine. Under the state's managed care initiative, many of these children get their publicly financed vaccines through private HMOs that contract with Medi-Cal.

Although federal administrators did not respond to calls from The Chronicle, those familiar with the issue say the problem lies in the literal interpretation of the federal law governing the vaccine program. To keep private insurers from dumping coverage of vaccines, a clause now bars coverage to "insured" children.

Sources say that vaccine makers have been lobbying Washington to enforce a literal interpretation. Federal rules require drug companies to provide vaccines for the program at a discount, and the drug makers may fear that the commercial health plans in California's program could divert the discounted vaccines to their subscribers who pay full freight.

Critics of the Wilson administration plan note that the issue would not have arisen if the state had taken the simpler route: expanding Medi-Cal to include the children eligible for the new program. Federal law allows free vaccines for Medi-Cal enrollees.

But that would have been anathema to the Wilson administration, which opposes further expansion of Medi-Cal and wanted to avoid putting a new set of benefits into an entitlement program.

"The Feds are holding back because we didn't do a Medi-Cal extension," said Beth Capell, lobbyist for the consumer health coalition Health Access. "Instead we did this silly private-insurance model."

Sandra Shewry, executive director of the Managed Risk Medical Insurance Board -- the state agency selected to run the Healthy Families program -- does not believe the Clinton administration is pressuring the state to drop its private insurance model in favor of expanding Medi-Cal.

She called the problem an "artifact" of legislative language drafted in a hurry. "If this issue had received debate, states such as ours would have weighed in," she said.

Shewry conceded that there are other issues with the federal government that must be resolved before the Healthy Families program can get the green light. They include disputes over California's plan to charge participants $5 per doctor visit and over California's plan to allow a health insurer to administer the program.

Wellpoint Health Systems, the Woodland Hills unit of Blue Cross that runs its managed care programs, had been picked to run the Healthy Families program. Shewry disclosed that, on Friday, Blue Cross withdrew its proposal.